Start-Up Adventures, Part 1: The MouseDriver Insider Collection

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"We have no income and no venture capital funding. Our inventory is being financed by companies with names like Chase, Citibank, First USA and Capital One. Our office consists of a refrigerator, oven, sink, two desks, a bay window and one very large Texas flag...

Thus begins the first MouseDriver Insider, a newsletter in which John Lusk and Kyle Harrison chronicle their adventures as they launch their start-up, Platinum Concepts Inc. Their product? Computer mice, called MouseDrivers, that are shaped like the heads of driver golf clubs. What's more, as Mike Hofman notes in an article in the February 2001 issue of Inc. magazine, the MouseDriver Insider has picked up a surprisingly influential readership.

You can read copies of MouseDriver Insider below. You can also visit Platinum Concepts' Web site at www.mousedriver.com.

Important note: Inc.com has not attempted to verify the accuracy of the material in these newsletters or to edit them.

We have no income and no venture capital funding. Our inventory is being financed by companies with names like Chase, Citibank, First USA and Capital One. Our office consists of a refrigerator, oven, sink, two desks, a bay window and one very large Texas flag. The only thing that makes our 7 second commute to work interesting is avoiding the inventory of computer mice stacked in our living room. We're motivated, passionate, excited, terrified and at many times, have absolutely no idea what we are doing. Every hour of the day is filled with constant mood swings and the question of "What the hell are we doing?" enters our minds on a daily basis.

But......we're having a great time and we truly believe that this is an experience of a lifetime.

Do you care to hear more?...

Since this venture began in July, we have received a number of inquiries from people asking us to keep them informed of our progress. Most of these inquiries have come from aspiring entrepreneurs currently working in the corporate world who want to live the "entrepreneurial experience vicariously through us." However, many of you have asked us to keep you informed simply because you're interested in finding out how this MouseDriver story progresses and ends. After all, some of you were around when this outrageous idea was first used as a class project at Wharton.

So, we've got an idea...and we're hoping that this one generates as much excitement as MouseDriver. Kyle and I would like to keep everyone informed of MouseDriver's progress. On a periodic basic, we'd like to share our successes, our failures, our issues, our stories and our feelings towards this entrepreneurial gig. We basically want to give all of you an opportunity to accompany us on this crazy ride.

Here's the deal: We will send out an email on a periodic basis. Depending on what we have to share, this email may go out every week, every two weeks, every month, etc...just depends on what's been happening and how busy we are. We have no idea what the email will look like, but imagine that the format will be constantly evolving. We will make all efforts to keep the progress update brief and to one page, as we are all too familiar with the annoyances of long emails. Plus, we don't want to create too much additional work for ourselves.

If you're interested, just reply to this email and say "I'm in" and we'll include you in the mailing.

Hope everyone is doing well.

John and Kyle

The MouseDriver Insider #1

September 13, 1999

This edition begins with some of our lessons learned over the past three months and then briefly covers our progress to date and our more pressing issues. The format will almost certainly change in the future. By the way, future editions will not be this long... .we just felt like we had a lot to share this time around.

Lessons Learned

"When your product or service is to existing products or services what toilet paper is to crumbled leaves, it's time to ship. S - h - i - p, ship" (Guy Kawasaki) If you think that you have a great product or service, it's best to get it out to customers and let them determine the success of the product rather than attempting to develop the perfect product/service. We spent over three months trying to perfect the initial MouseDriver design. Regardless of how good each design sample looked, we always managed to find something wrong with the size, weight, color, etc. Finally, around mid-July, we realized that any more design changes would result in missing part of the '99 holiday sales season. So, we decided to manufacture a product that we knew needed a number of improvements. The result: the response to MouseDriver has been very positive and we've received a ton of feedback on how to better improve the product... much better feedback that what the two of us working together could provide.

Don't be paranoid about sharing your idea with others. Early on, we were afraid to even mention the MouseDriver name to distributors and suppliers, much less what the product actually looked like. We were convinced that someone was going to steal the idea, become an entrepreneur, find a manufacturer overseas, raise the money to design the product and find a distribution network before we even had a chance to get off the ground. Needless to say, we couldn't have been more naï ve. Once we started sharing the idea with people in the promotional products industry, we found ourselves learning more and more about how to bring MouseDriver to market. In fact, for a few weeks, our strategy was changing on a daily basis. Following our conversations with another supplier/distributor, we'd reserve a conference room (corner table) at Starbuck's and hash out another distribution strategy. Our advice: share your idea with as many people as possible. You'll learn a lot more.

Take your initial time estimates on when you think things will start to happen and multiply by at least 4. Unless you've had a similar entrepreneurial experience in the past, chances are, you will miss every date and milestone that you have set for the company. Fortunately, in many situations, you are not the one to blame for screwing things up. As a start-up (with no major funding or strategic partners), you will find that larger companies do not share the same sense of urgency as you do. You will also find that, despite how great your idea is and how strong your background may be, you have NO LEVERAGE. You will want to move at 200 mph, but because you are in a constant state of waiting, you're forced to move at around 50 mph. This period is extremely frustrating and will cause you to constantly second-guess your entrepreneurial decision. One suggestion: keep plugging away and laughing at the situation. At some point in time, everything comes together at once and the speedometer very quickly hits 500 mph... and then you become frustrated for other reasons.

If you have a family (i.e. significant other/kids), make sure that they fully understand the ramifications of you're new situation. We are working constantly and because we are working out of our apartment, we feel compelled to work every hour of the day. We definitely manage to get out a couple of nights a week, but most nights are spent working until 1am. Neither one of us can fathom doing this gig with 1) a wife or 2) with kids. In fact, we don't see how someone could pull this off without putting some sort of strain on the family relationship. Our utmost respect and admiration goes out to those entrepreneurs who are starting their own companies with a significant other and family in tow. Our advice (like either one of us is qualified to give relationship advice): make sure that you're family understands that you may be MIA (missing in action) for a certain period of time and make sure that the family is extremely supportive of what you are about to get yourself into.

What We've Done

Sent out over 200 MouseDriver samples to contacts/distributors/customers and gathered feedback on how the product would fare in the promotional products and the consumer retail industries.

Finally committed to a large inventory investment. In an effort to keep our equity "in-house" we both borrowed money against our personal assets to make this investment.

Started to personally sell MouseDriver's to the corporate market (mainly financial services firms) and began establishing an independent sales representative network for the '99 Holiday Season.

Learned a ton about the promotional products industry by meeting with a number of distributors, suppliers and corporate marketing managers.

Priority Goals

Find a company advisor. Preferably someone who has significant consumer product and retail experience.

Develop a strategic relationship with the right distribution network. The ultimate goal is to partner with a supplier who can manage the intricacies of fulfillment and allow us to focus on marketing/PR.

Identify when to start the design of an upgraded MouseDriver product that will be sold in the retail market.

Identify when to make the next inventory investment (b/w 50,000 and 250,000 units).

Let us know if you want certain issues to be discussed... we've encountered a bunch of 'em.

"Typhoons and earthquakes and floods... oh my!"

The world has experienced a slew of natural disasters over the past three months. Unfortunately, when you're manufacturing a product overseas, you're at risk of being effected by one of these disasters. Case in point: A typhoon struck Hong Kong in mid-September, shutting down our manufacturing facility and delaying shipment of our first 2500 units by 4 days. 48 hours later, an earthquake struck Taipei, halting the production of the integrated circuits that are used in our mice and delaying shipment another 7 days. So, over the course of 48 hours, our entire supply chain was cut off and our first deliveries delayed. Luckily, we had been warned of "random" issues in Southeast Asia and had planned for potential delays. At least the ship carrying our product didn't sink... which apparently happens more than you might think.

Distribution is key. We can't stress how important finding the right distribution channels are going to be to the success of this venture. You may have an incredible product, but its ability to sell is totally dependent on methods of distribution. In the beginning, we were excited about personally selling MouseDriver ourselves. We've very quickly realized how much of a pain-in-the-rear personally selling can be. So, on the corporate side of things, we're looking to team up with a supplier who will purchase from us and push MouseDriver through their already existing distribution network. On the retail side, we're utilizing independent representatives, segmented by industry, to push the product to retailers and consumers. Obviously, developing a strong relationship with the distribution network is paramount. For all of you following the next big internet trends (and who isn't), keep an eye out on those companies who have successfully integrated bricks and mortar distribution with e-tailing.

Find a company advisor as soon as possible. The opportunity to run our initial strategies by a seasoned veteran would have saved us time, frustration, and headaches in the early stages. Advisors can comment on your direction, make important introductions and share their battle wounds. They can truly be of great benefit to your company. However, take the time to find the right advisor. Even though an advisor may have all the right credentials, make sure that they are willing to take time out of their schedules to address your concerns. Otherwise, they'll add little value. We've been searching for an advisor for over two months now and believe that we have finally located one... we'll keep you posted.

Began targeting the golf industry as our first retail market and established a relationship with an independent sales representative (a former PGA Tour player!).

Finalized two online partnerships to help build MouseDriver brand awareness and to help gather market research data (check out the Sports Prize Section on the PrizeCentral.com Web site).

Started a public relations campaign within the golf industry slated to coincide with the retail buying season in January/February.

Showed MouseDriver at two golf shows (Vegas and Orlando) in an effort to generate "buzz" and determine initial demand.

Designed and manufactured our corporate packaging that will also be used for initial retail sales (and by the way, we've learned that packaging is just as important as the actual product).

Priority Goals (5 of our first 100):

Identify strategic licensing opportunities within the golf market to help establish and maintain brand name.

Identify/finalize a supplier relationship within the corporate promotional products market.

Continue with our golf PR campaign and begin focusing on a more mass market campaign for early 2000.

Utilize feedback from golf trade shows and initial corporate and retail sales to gauge MouseDriver demand and to help us determine the size of the next inventory investment.

Visit manufacturer (supplier) in Hong Kong to better understand the manufacturing process/supply chain and to expedite the design process of MouseDriver II (incorporating feedback that many of you have provided us).

No need to ask for permission to forward these issues of MouseDriver Insider. Feel free to pass this message along to anyone who might be interested.

"If you build it, they will come." Surprisingly, MouseDriver has caught the eye of the professional golfing world. We have spent the last two weeks in discussions with a group of pro golfers/television commentators (and yes, most of you have probably heard of these guys) who have shown an interest in getting involved with the company. This group feels that an initial direct sales approach is the best way to go and that selling MouseDriver exclusively through a 30 second infomercial/commercial spot marketed towards the masses is the best way to ensure success. Although we'd be absolutely psyched to work with these guys (imagine all the fringe benefits), our intuition and basic business knowledge tells us that focusing on a single channel is just a bit too risky at this point in time. The bottom line issue: Do we utilize a "Big Bang" approach to blow this out via direct sales, or do we focus on targeting a specific market by utilizing a mix of different channels? Decision is to be made this week.

As a single-product company, we realize that building "buzz" around the product and generating positive PR is going to be critical to the success of MouseDriver. This month, we launched a PR campaign within the golf industry that primarily targets golf publications and media groups. We're hoping that the PR hits around January and February, in conjunction with all of the trade shows that we're scheduled to attend. However, if the PR hits any earlier (i.e. December), we stand the chance of not being able to fulfill potential Holiday Season demand. We'd hate to launch MouseDriver, get a ton of demand and not be able to supply product. So, by launching a PR campaign, we've opened ourselves up to some fulfillment risks... which will totally be determined by the golf media.

Once again, distribution is "key." We have made the decision to redesign the Web site with full e-commerce capabilities. By January, individuals, retailers, corporations, etc. will be able to purchase MouseDriver via our Web site. What that means is that we have to locate a warehouse/fulfillment center who can integrate electronically with our Web site as well as hold sufficient MouseDriver inventory. The whole idea is to make the ordering process as seamless as possible... the only thing we should see at the end of the month is a check in the bank account. FYI: good e-commerce solutions that tie into fulfillment centers ain't cheap, but it allows you to supply product much easier and more efficiently.

Began working with a golf charity organization that will use MouseDriver as a giveaway to people who donate money to the charity. The organization has agreed to co-brand their advertisements with the MouseDriver logo and description in a number of major newspapers around the country. We get free advertising in addition to goodwill!

Began negotiating with 3 suppliers in the promotional products industry.

Secured booth space for the 2000 PGA Tour Golf show to be held in Orlando, Fla. in February.

Met with a couple of pro golfers and someone who we believe to be the real "Jerry Maguire."

Signed up for personal golf lessons. (Our golf game sucks and industry veterans have told us that we won't close many deals unless we're able to hold our own during a round of golf.)

Priority Goals

Move (Sell) as many of the 26,000 MouseDriver units currently in inventory before year's end.

Determine which promotional products suppliers best meets our current needs and long term strategic goals.

Corporate culture/company values will also play a part in the final decision.

Begin the development of a new web site and e-commerce solution.

Explore financing options for a very large inventory investment (i.e. > 100,000 units) sometime within the next 2 months.

Find a company advisor who can provide insights/perspectives on the retail side.

OK, it's time to admit our first mistake... and we'll claim ignorance on this one. We could have done more to prepare for the '99 retail season. Back in June, when we were making all of the "strategic" decisions, we were told that 90% of all retailers make their purchasing decisions in January and February. So we assumed that there was no way we could obtain retail shelf space for the holidays and focused our strategy on selling MouseDriver as a promotional product to the corporate market. If it weren't for our golf industry sales rep, we would still be cold calling major banks trying to sell them the MouseDriver concept. But, like most budding entrepreneurs, we're trying to make the best out of our mistakes. Our current 1999 strategy is to utilize the holiday retailing season to test market MouseDriver (i.e. sell through a bunch of different/fragmented retail channels). We're hoping that by test marketing the product, we can gain valuable information that will help us better position and market MouseDriver when we "officially" introduce it at the PGA Merchandising Show in February.

Speaking of our sales rep... We both agree that having a strong sales force is probably the most important factor in getting the product to consumers. Whether you're hiring a sales force directly into the company or using independent representatives to help "push" the product, these individuals can make or break the company. A couple of months ago, we made an important decision to hire an independent sales representative and a public relations consultant in the golf industry. At first, there was a definite "us" vs. "them" atmosphere as both sides were primarily interested in executing their own agendas. But, over the months, we have opened up to these guys and brought them into the company as if they were actual employees. We have shared our overall strategies, our concerns, our goals, etc. with them and they have done the same with us. We have made them feel like a part of the company and we feel that this will greatly benefit us in the future.

The "emotional rollercoaster" mood described a few weeks ago has become even more of a ride. Every day is a series of ups and downs and if you're not prepared to handle the swings, the chances of surviving from a personal prospective are pretty slim. We won't lie to you, this part of entrepreneurship really SUCKS!! For example, we'll wake up in the morning and immediately receive and order for 200 mice. Emotions are running high, enthusiasm prevails, high fives are flying around, and then, we won't receive a single phone call for the rest of the day. Depression and doubt then reigns. At least we've learned to recognize when we're about to hit a valley. Thank goodness the Presidio Golf Course is only a 5-minute drive away.

What We've Done

Turned down a deal with a group of professional golfers (citing overall strategy, timing, and deal structure as the primary differences).

Spent money to design and develop a new and improved MouseDriver prototype. Not cheap!

Sent out over 400 media kits (press release, slide, color picture, the MD story, etc.) to writers and publishers in the golf industry.

Purchased a Sony PlayStation to be used during some of the "valleys" mentioned above.

Guest lectured in an entrepreneurial marketing class and served as panelists for a business plan competition seminar at the Wharton School.

Finally paid all of our back expenses that we have been incurring on credit cards. Simultaneously, we both managed to increase our credit limits on these cards.

Priority Goals

Make as many people as possible aware that MouseDriver units are available for the Holiday Season.

Finalize and ink a deal with a supplier in the promotional products industry. Our meeting with the first supplier occurs tomorrow.

Continue to search for an advisor... had we found one this Summer, we would have been able to devise a retail strategy much earlier.

Practice enough golf so that we at least look like we know what we're doing the next time our golf instructor video tapes our swings.